As the recession was crushing the country in early 2009, Republicans, fearing a massive government response, began repeating a storyline that FDR’s New Deal prolonged the Great Depression. The vast majority of economists and historians dismissed the theory but it continued to live in bowels of conservative lexicon. I haven’t heard it for awhile until John Hood repeated it in his column this week.
As North Carolinians suffer under the austerity program of the Republican-controlled state legislature, John and his colleagues oppose government programs that might address our stagnate unemployment. They’ve latched onto a highly controversial 2004 study and book that claim New Deal incentive programs hindered the recovery from 1933-1940. Their theory goes something like this:
Unemployment during the the New Deal was much higher than previously reported because government-sponsored make-work jobs should not be considered as employment even though people were working. since businesses did not start hiring and worker productivity remained remarkably low. The study’s authors contend that uncertainty kept businesses from investing and unemployment did not get below 9% until 1940. Had FDR let the depression just run it’s course, it would have ended sooner.
The theory fails to take into account the political realities of the day. When FDR took office, the country was suffering 25% unemployment. Herbert Hoover’s do-nothing approach left the country demoralized with little confidence in government or the financial institutions necessary to get the economy moving again.
Roosevelt gave people reason to hope and trust. His Federal Deposit Insurance Corporation (FDIC) protected investments and savings and got people back into the banks. His jobs, energy and rural electrification programs gave people confidence and built the infrastructure that supported and sustained the post-war economic boom. New Deal programs led to a steady drop in unemployment and steady rise in GDP. What finally ended the Depression was a massive government buying and jobs program as the country prepared for World War II.
Right now, North Carolina could use a dose of New Deal pragmatism. We have serious infrastructure needs and the fifth highest unemployment in the country. Seems like a perfect match.
Instead, we have a governor determined to “fix” what’s already working and a leaderless legislature that’s made North Carolina a national laughing stock. And their one point of agreement seems to be to keep us on a path of austerity. It’s worked so well in Europe.
Thomas Mills is the founder and publisher of PoliticsNC.com. Before beginning PoliticsNC, Thomas spent twenty years as a political and public affairs consultant. Learn more >